30th November 2023

What is a cohabitation agreement and what might it cover?

Constance Tait

Associate

A couple who live together are not afforded any automatic rights in respect of each other’s property and/or income, notwithstanding how long they might have lived together or if they have children together (although claims can be made for the benefit of the children).

Financial disputes between a cohabiting couple are governed by general legal principles relating to property ownership. These principles are complex and determining disputes in accordance with them can be costly, time-consuming and uncertain. A cohabiting couple may wish to regulate their financial relationship whilst they live together and in the event that their relationship comes to an end through a cohabitation agreement.

A cohabitation agreement is a legally binding, flexible document.

Typically, they address:

The ownership of the property that the couple lives or will live in
How the parties will manage their financial arrangements (i.e. if one party pays rent to the other or if they will keep their finances separate or have a joint account, and living expenses)
How their possessions are or will be owned
Whether the parties intend to make provisions for each other in their Wills; and
What happens if the parties’ cohabiting relationship ends, including with respect to whether any financial provision will be payable, and what provision would be made for any children (although it is not possible to enter into a binding agreement that limits provision for children).

A cohabitation agreement can provide certainty, as it enables parties to formally set out how they will determine their future financial arrangements, which may in turn also help them avoid legal disputes further down the line.

It gives the parties autonomy over their finances whilst ensuring that each has a clear understanding of their respective position.

The process by which a cohabitation agreement is entered into fosters open conversation about the couple’s financial circumstances and intentions for the future.

In circumstances where the parties have chosen not to marry or enter into a civil partnership, a cohabitation agreement can provide the financially weaker party with financial security whilst also providing comfort to the financially stronger party that their assets are secure.

However, other than in relation to terms addressing property ownership, there is some legal uncertainty about the enforceability of the wider terms of cohabitation agreements.

It is widely considered that the terms dealing with financial matters will be enforceable but there is no recent case law on this point.

That being said, parties should assume that they will be held to the terms of the cohabitation agreement, even if their circumstances have changed significantly since it was signed. Where circumstances do change, the cohabitation agreement would need to be updated, so it should be regularly reviewed. Entering into the agreement, and reviewing it in future, inevitably involves a financial cost, and the process may put a strain on the relationship.

It is important that each party takes independent legal advice and provides the other with financial disclosure, so they have a proper understanding of the other’s financial circumstances and the consequences of the agreement on their rights.

The Hunters family team has experience advising on cohabitation agreements – if you have a query relating to one, please do get in touch with us.